A standard RGB image consists of the three red, green and blue layers called channels. RGB images consist of differing quantities of red, green and blue colors mixed together. An alpha can be added for special effects to our RGB images as an additional channel (see second image). For an example of how an alpha works, think of an alpha as a cardboard mask that you lay on top of your image to hide it. Then you cut out holes in the mask to let some parts of the image or special effect show through. An alpha is like that.
The most common use for an Alpha is transparency, where black determines which part of the image will be invisible and white will control which parts to display. Depending on the image type, shades of grey can be used for semi-transparency too. They can also control where special effects such as shine are applied to an image.
How you add an alpha channel to your image will differ from program to program. More help is detailed in the Object Creation Part 2: Object Textures guide.
Examples
Wall masks: used for windows and doorways, black on the alpha cuts a hole in the wall, white is treated as solid wall.
Overlays and stencils: white on the alpha ensures that part of the image is added to the mesh; black is ignored.
Speculars: white on the alpha forces shine regardless of the pattern applied to the mesh; black leaves reflectivity the pattern chosen by the player (the white on the alpha channel below forces the funnel of this hand dryer to be permanently reflective).
RGB Masks: white is used for marking areas painted by a fourth pattern if the creation supports four patterns. Note that the fourth color of an RGB Mask that sits above the alpha can be ANY color other than red, green or blue. EA frequently uses a dark orange or bright pink.
Multipliers: adding a white alpha to a multiplier and then painting black in certain parts will make those parts of your mesh totally invisible as shown in the chains of this Drawbridge (see its multiplier and its alpha channel below). The image below shows the multiplier and its underlying alpha. Multipliers can also use alphas in greyscale shades to achieve semi-transparency as shown in these Modern Nursery sheers.
For more information on working with alpha channels, see our guide to Object Creation Part 2: Object Textures.